Smooth Sailing for Offshore Wind?

Two firms are planning to start construction off the East Coast within the year.

The temperamental waters off Rhode Island’s Block Island may be known for the Pequod and other Moby Dick-style whaling ships, but soon they could become notable for something else.

If all goes as planned, Deepwater Wind, a Providence, R.I.-based energy firm, could become the first company to start construction of a wind turbine farm off of the East Coast. By the end of this year, five turbines, each nearly as tall as the Washington Monument, could start taking shape about 3 miles off craggy Block Island and some 18 miles from the mainland.

The goal, says Jeff Grybowski, Deepwater Wind’s chief executive, is to demonstrate to the financial community that offshore wind is “doable.” That is the key word. While coastal waters of state-subsidy-rich Western Europe are chock-a-block with wind turbines, offshore wind energy in this country is still waiting for the first breeze.

High costs, infuriatingly complex regulatory approvals, a lack of government financial support, and environmental opposition have badly impeded what otherwise may seem an obvious and attractive alternative to fossil fuel and nuclear power. Offshore wind gives off little or no pollution and contributes next to nothing to global warming. Its chief drawback is that it can be a hazard to migratory birds—that, and the worry that wind turbines can ruin spectators’ sea views.

Now, however, the fledgling wind industry is showing signs of life, including the possible construction starts for two projects and the first-ever federal competitive bidding of locations for new wind farms off of New England and Virginia set for later this year. President Barack Obama specifically gave offshore wind a boost in his State of the Union address on Feb. 12. By some estimates, East Coast wind could eventually generate 127 gigawatts of power—enough to meet half of the energy needs of coastal states.

A second firm, Cape Wind, likewise plans to get construction started by later this year or in early 2014. It is the country’s first firm to propose a large offshore wind farm, planning a 420-megawatt project in Nantucket Sound. It has received its final regulatory approvals and is ready to seek large-scale financing in this year’s third quarter, says Cape Wind spokesman Mark Rodgers. It could be a toss-up whether Deepwater or Cape Wind, operated by Boston’s Energy Management Inc., becomes the first to start building.

Also later this year, the federal government is to start its first competitive lease-sales of some 164,750 acres 9.2 miles off the Rhode Island and Massachusetts coasts and 112,800 acres about 23.5 miles off the Virginia coast. (The Deepwater and Cape Wind projects did not involve bidding.) The two federal tracts to be auctioned off could eventually host enough turbines to generate 4,000 megawatts of power or enough to supply 1.4 million homes.

Deepwater and other firms are interested in the northern project, while eight companies, including Spain’s Iberdrola SA and Richmond, Va.-based Dominion Virginia Power, are eager to participate in the Virginia lease-sale that will be held by the Bureau of Ocean Energy Management. “They are very motivated to get the auction going,” says Guy Chapman, head of Dominion’s offshore wind generation team.

Yet another project, called Atlantic Wind, which includes computer search-engine titan Google, hopes to get a project that could eventually produce 3,000 megawatts of power off the coast of New Jersey. The first step is to build a 189-mile transmission line that would allow turbines to be placed farther offshore and could be robust enough to withstand the superstorm Sandy-type hurricanes.

A flood of unexpectedly cheap natural gas could put a damper on offshore winds’ fresh enthusiasm. Electric utilities may find it cheaper and easier to enjoy cheap gas while they can and put off more costly investments in alternatives, at least in the near term. “There’s some truth that the decline in gas prices has changed people’s perception about the urgency of renewables,” says Grybowski. But, he adds, wind advocates have learned to think in the long term. “The Massachusetts Department of Public Utilities is not comparing us with natural gas or coal but with solar and other alternatives,” he says.

The Northeast is the incubator for U.S. offshore wind for several reasons. Geography helps because electricity has trouble traveling long distances. Offshore turbines would be close to densely populated urban areas such as New York and Boston that have a high demand for power but not much space to build more big facilities such as nuclear or coal-fired power stations.

Local weather conditions are a plus. Offshore winds tend to pick up in intensity during the late afternoon during summer months when electricity demand is highest. Otherwise, winds off the Northeast coast are steady. A University of Rhode Island study showed that over 25 years, winds measured off Buzzard’s Bay blew at a regular 15 mph clip—a pace that beats wind rates inland.

Another favorable reason is that Northeastern states are strict regulators and have set goals of ensuring that a significant minority of the power used by the utilities it oversees comes from alternative energy. New Jersey, for instance, has mandated that 22.5 percent of its power come from renewables by 2021. Farther south, the goals are looser. In Virginia, they are entirely voluntary, although North Carolina has a mandatory 12.5 percent renewable energy source goal.

Northeastern power customers also may be more willing politically to swallow higher bills. Erecting wind turbines and the underwater infrastructure needed to support them and handle the power they generate can be very expensive. The Energy Information Agency prices offshore wind at $330.6 per megawatt hour. That is more than double what nuclear power costs and more than three times what a conventional coal-fired plant without carbon capture technology costs.

Prices for electricity tend to be high in the Northeast because utilities are farther away from traditional fuel sources, such as coal. A New Yorker may pay 17 cents per kilowatt hour to keep his lights on while a Virginian pays only 10 cents per kilowatt hour. Therefore, the thinking goes, it may be less jarring for Northeasterners to see extra fees in their bills coming from offshore wind. When Cape Wind gets its 170-megawatt project up and running in Nantucket Sound, it will sell its power to the local electricity grid for 20.7 cents per kilowatt hour, says Cape Wind’s Rodgers.

For a look at what offshore wind can do, consider Western Europe, where building wind farms is a public policy goal. The United Kingdom’s Greater Gabbard Wind Farm and Walney Wind Farm are the biggest in the world, and the country plans an even bigger one. Denmark, Belgium, Germany, and China round out the list of the top 25 largest sites.

Government support is no problem and comes in the form of subsidies, tariffs, or taxes. “Europe is a decade-and-a-half ahead of us,” says Tom McNeilan, an executive of Fugro N.V., a Dutch company that handles offshore wind engineering and consulting. McNeilan is attached to Fugro’s Norfolk, Va., office, which opened in 2007 to be part of the developing East Coast market.

So far, America’s experience with offshore wind couldn’t be further from Europe’s. Pioneer Cape Wind has been through a regulatory nightmare and has the scars to prove it. Its plans for Nantucket Sound were approved 11 years ago, when offshore wind seemed more like a great idea than a real possibility. It’s been tough going since.

It did not then nor does it now have serious support from the federal government, which only offers tax credits for experiments and no direct subsidies. The firm has been helped because Massachusetts requires that 15 percent of electricity used in the state come from renewable sources by 2020. With renewable as the watchword, Cape Wind plans 130 turbines each 258 feet above the shallow waters of Nantucket Sound between Cape Cod, Nantucket, and Martha’s Vineyard.

The first impediment was a confusing and expensive regulatory learning curve. “Federal agencies did not have the experience to review it,” Rodgers says. At first, oversight was assigned to the U.S. Army Corps of Engineers, which spent three years preparing an environmental impact statement. A legal change then put the Department of the Interior in charge, which took another three years and hundreds of pages of review.

Bird strikes are an issue for both inshore and offshore wind, but measures can be taken to minimize them, such as siting turbines away from known nesting areas and flight paths and placing blades higher on turbines. The National Audubon Society has issued a statement supporting wind power provided care is taken to avoid killing birds.

Another big hurdle might be an accident of location. Cape Wind opted to put its wind farm between three major resort and summer home areas favored by the rich and powerful, creating some strange bedfellows among opponents. The odd and variegated list has included the late television anchor Walter Cronkite and late Sen. Ted Kennedy and ultraconservative oilmen David H. and Charles G. Koch. All own or owned property within view of the wind farm.

Now that Cape Wind has won final approval, other firms that had been standing on the sidelines watching may be ready to move forward, including deep-pocketed electric utilities. One is Virginia Dominion Power, which is interested in developing the tract up for federal auction that is about 20 miles off the city of Virginia Beach, Va. The tract could generate about 2,000 megawatts of electricity, or slightly more than one of Dominion’s nuclear power stations.

According to Dominion’s Chapman, the location is ideal because it is too far away to be seen by vacationers and is close to Hampton Roads, Va. The giant port is packed with defense facilities and already has redundant electrical lines that can easily draw on electricity produced offshore. Its shipyard facilities will make it easy to fabricate the giant turbines that will be hauled out to sea and erected.

One problem, Chapman says, would be finding enough specialized ships available to erect the turbines. Many are foreign-flagged vessels, which by U.S. law cannot move in and out of American ports without special waivers. The Navy and Air Force earlier objected to the possibility of offshore oil drilling because they use offshore areas for combat training, and turbine blades can upset radar scans. But the services have given their guarded assent to wind farms. Chapman says the Navy might go along if workers are taken off the turbines when the fleet plans maneuvers.

To get more experience with wind, Dominion plans to build a pair of prototype, 6 megawatt wind turbines off the coast. The $4 million project was funded in part with grant money from the Department of Energy. Chapman says there’s a lot to learn from the Cape Wind experience in terms of “permitting and public outreach.”

If so, Cape Wind’s trials will not have been in vain. What could be an important new source of less polluting alternative energy would finally be tapped.